This much is obvious: if you want to stop your customers from churning, you will need to make them happy with your product/service. However what is less well understood is what makes a happy customer? Many SaaS companies believe this comes from engagement and usage of the product. However I believe they are on the wrong track, and I’d like to move the conversation to a higher plane. Customers bought your product to get a clear business benefit. To make them happy, I believe that you need to make sure they are getting the business benefits they hoped for.
This presents an interesting change in thinking for many startups. Because most startups are created by passionate product people, they tend to fall in love with their product and its features. Often this means that they lose touch with the simple messaging around business benefits. For example, let’s take one of my better known portfolio companies: HubSpot. HubSpot provides many interesting product features such as SEO, blogging tools, social media tools, a contact database, lead nurturing tools, email tools, etc. It’s easy to get carried away with making sure that the customer is using each of these tools. But in doing so we are losing sight of the key reason that the customer bought the product in the first place. I believe that HubSpot’s business value can be quantified in two simple sentences:
Get More Leads
Convert more of your leads into buying customers
If you were to ask any CEO if they want these benefits, I believe over 99% of them would say yes. But if you were to ask that same CEO if they were happy that their marketing person had spent five hours using a bunch of different features, they would likely ask why they were spending so much time, and they would want to know if there was a return on investment for all that time.
So a great starting point for making your customers happy is to make sure they are getting the business benefits that caused them to sign up in the first place. For some startups, this will mean taking the time to figure out a really simple way to express the key business outcomes that their product will deliver. That message should resonate with the CEO of your buyer if you had one minute to describe it to them in an elevator.
QUANTIFY THE BUSINESS OUTCOMES:
Once you have identified the key benefits, ask the question of whether these can be quantified. Then ask the question: what numeric value would constitute success. i.e would 5% more leads be a good outcome, or would it take 50% more leads to make the customer happy?
OTHER ELEMENTS OF CUSTOMER HAPPINESS:
There may also be other elements that make for customer happiness:
There is a clear return on their time and money invested in using the product
The product does not frustrate them with bugs, data loss, slow performance, irritating user interface, etc.
There are no key missing features, or integrations with other products that they use
They get good customer service when they call in to get help
MEASURE CUSTOMER HAPPINESS/HEALTH
“If you cannot measure it, you cannot improve it” – Lord Kelvin
HubSpot may have been the first company to introduce the notion of a measurement to predict churn with their CHI score (Customer Happiness Index). The CHI score measured which parts of the product each customer was using, and awarded a higher score for features that were thought to be more sticky.
They had quickly realized that SEO was not particularly sticky, as the customer would do a lot of work in the early days, but after setting their site up correctly, they would have gained most of the benefits. Many churned at that point. However if the customer had hosted their blog with HubSpot, or was using HubSpot’s Contact Database to track customer details and behaviors, those were sticky features, and would make it harder for the customer to churn.
Recency and and frequency of activity would also help provide a good indicator of customer engagement.
However HubSpot soon found that although useful, CHI was not a great predictor of churn. Just because someone was using the product, they were not necessarily happy with the product.
But they were still on the right track: we need to find a way to measure customer happiness to be able to find unhappy customers and take corrective action before it is too late.